The largest French bank by market value, BNP Paribas said today that it would raise $6.27 billion in a rights offer in order to repay the French government bailout funds.
The liquidity crunch faced by global banks in the wake of the collapse of the US sub prime mortgage market that led to the collapse of Bear Sterns and Lehman Brothers, compelled the French government to bail out Paris-based BNP Paribas by pumping in on two occasions a total of $12.4 billion, of which, $7.5 billion was loaned in March 2009 to boost the bank's capital reserve.
By raising $6.27 billion through a rights offer, the BNP Paribas board aims to repay the loan as well withy an interest of $330 million, the bank said in a statement today.
BNP Paribas is offering its shareholders 1 new ordinary share for 10 existing shares at a subscription price of €40 per share- representing a discount of around 29 per cent to BNP's Monday's closing price of €56.57.
The bank itself will be lead manager for the offering of 108 million new shares, while the French financial giant, AXA Group, which holds 5.2 per cent of the bank's common shares, will subscribe to new stock ''by exercising all of the preferential subscription rights it will be granted,'' said the bank.
As part of the bailout deal with the French government, BNP had agreed to increase lending to households and companies by at least 3 per cent this year and said that it would stand by its commitments to the French government.